The Four Intrinsic Rewards that Drive Employee Engagement

Motivational dynamics have changed dramatically to reflect new work requirements and changed worker expectations. One of the biggest changes has been the rise in importance of psychic, or intrinsic rewards, and the decline of material or extrinsic rewards. This author draws upon recent research to explain the popularity of intrinsic rewards and how these rewards can be used to build a high-engagement culture.

I have been researching workplace motivation for about 30 years and I’m amazed at how much has changed recently. Automation and off-shoring have eliminated most of the highly repetitive jobs in the U.S., while global competition has produced flatter, more responsive organizations that require employees to use judgment and initiative to a much greater extent. Over this same 30-year period, the proportion of American workers who say that their work is meaningful, allows them discretion, and makes use of their abilities has more than doubled—from less than one third to about two thirds.1 In addition, younger workers now come to organizations with different expectations than their parents. Raised during an era of rapid technological change and instant access to data, they respond best to work that is more meaningful, allows them to learn cutting-edge skills, and lets them find their own ways of accomplishing tasks.

Most of the motivational models used today were developed in earlier eras, when work and workers were different. That is why my colleagues and I developed models and strategies of motivation that better reflect the changes in today’s work dynamics.2 In doing so, we discovered that intrinsic rewards have become more important and more prevalent in the workplace today. This article will describe the reasons for this increase and why intrinsic rewards are so important today.

Extrinsic and intrinsic rewards

Extrinsic rewards—usually financial—are the tangible rewards given employees by managers, such as pay raises, bonuses, and benefits. They are called “extrinsic” because they are external to the work itself and other people control their size and whether or not they are granted. In contrast, intrinsic rewards are psychological rewards that employees get from doing meaningful work and performing it well.

Extrinsic rewards played a dominant role in earlier eras, when work was generally more routine and bureaucratic, and when complying with rules and procedures was paramount. This work offered workers few intrinsic rewards, so that extrinsic rewards were often the only motivational tools available to organizations.

Extrinsic rewards remain significant for workers, of course. Pay is an important consideration for most workers in accepting a job, and unfair pay can be a strong de-motivator. However, after people have taken a job and issues of unfairness have been settled, we find that extrinsic rewards are now less important, as day-to-day motivation is more strongly driven by intrinsic rewards.

The intrinsic rewards in today’s work

To identify these intrinsic rewards, we began by analyzing the nature of today’s work. Basically, most of today’s workers are asked to self-manage to a significant degree—to use their intelligence and experience to direct their work activities to accomplish important organizational purposes. This is how today’s employees add value—innovating, problem solving and improvising to meet the conditions they encounter to meet customers’ needs.

In turn, we found that the self-management process involves four key steps:3

Committing to a meaningful purpose

Choosing the best way of fulfilling that purpose

Making sure that one is performing work activities competently, and

Making sure that one is making progress to achieving the purpose.

Each of these steps requires workers to make a judgment—about the meaningfulness of their purpose, the degree of choice they have for doing things the right way, the competence of their performance, and the actual progress being made toward fulfilling the purpose. These four judgments are the key factors in workers’ assessments of the value and effectiveness of their efforts—and the contribution they are making.

When positive, each of these judgments is accompanied by a positive emotional charge. These positive charges are the intrinsic rewards that employees get from work, ranging in size from quiet satisfaction to an exuberant “Yes!” They are the reinforcements that keep employees actively self-managing and engaged in their work.

The following are descriptions of the four intrinsic rewards and how workers view them:4

Sense of meaningfulness. This reward involves the meaningfulness or importance of the purpose you are trying to fulfill. You feel that you have an opportunity to accomplish something of real value—something that matters in the larger scheme of things. You feel that you are on a path that is worth your time and energy, giving you a strong sense of purpose or direction.

Sense of choice. You feel free to choose how to accomplish your work—to use your best judgment to select those work activities that make the most sense to you and to perform them in ways that seem appropriate. You feel ownership of your work, believe in the approach you are taking, and feel responsible for making it work.

Sense of competence. You feel that you are handling your work activities well—that your performance of these activities meets or exceeds your personal standards, and that you are doing good, high-quality work. You feel a sense of satisfaction, pride, or even artistry in how well you handle these activities.

Sense of progress. You are encouraged that your efforts are really accomplishing something. You feel that your work is on track and moving in the right direction. You see convincing signs that things are working out, giving you confidence in the choices you have made and confidence in the future.

Levels of intrinsic rewards

Professor Walter Tymon (Villanova University) and I developed and refined a measure of the four intrinsic rewards, now available as the Work Engagement Profile.5 Together with our colleagues, we have used it for research, training, and interventions in a number of organizations in the U.S., Canada, and India.

We found it useful to break down each reward into three levels—high (the top 25% of our norm sample), middle-range (middle 50%), and low (bottom 25%).

High-range scorers experience the four intrinsic rewards most intensely. These rewards are highly energizing and engaging.

Middle-range scorers experience these same rewards to a more moderate degree—as somewhat positive but limited. For example, their work may seem reasonably meaningful when they stop to think of it; they may have a fair amount of choice but have to live with some decisions that don’t make sense to them; they may feel they do most things pretty well but not a few others; and they may feel they are making some progress but less than they would like. They experience these reward levels as moderately energizing and engaging—enough to put in a “fair day’s work,” but end up feeling less satisfied than they would like.

Low-range scorers are dissatisfied with many aspects of their work. They may feel their work is relatively meaningless or pointless, that they are unable to make or influence decisions about how to do their work, are unable to perform work activities very well, and are making little or no headway. Experiencing these feelings drains the workers of energy and they are likely to become cynical and resentful about their job over time.

Important benefits of the intrinsic rewards

Our research findings to date reveal the widespread benefits of the above intrinsic rewards for both organizations and employees.6

From the organization’s viewpoint, our data confirm the impact of the intrinsic rewards on employee self-management. For example, people with high reward levels show greater concentration and are rated as more effective by their bosses. But the benefits extend beyond self-management. The intrinsic rewards are strong predictors of retention. Note that this is the “right” kind of retention—keeping the people who are energized and self-managing rather than those who can’t afford to leave. We find that employees with high levels of intrinsic rewards also become informal recruiters and marketers for their organization. They recommend the organization to friends as a place to work and recommend its products and services to potential customers.

The intrinsic rewards are also a relatively healthy and sustainable source of motivation for employees. There is little chance of burnout with this form of motivation. Workers with high reward levels experience more positive feelings and fewer negative ones on the job. Their job satisfaction is higher, they report fewer stress symptoms, and are more likely to feel that they are developing professionally.7

Overall, the intrinsic rewards seem to create a strong, win/win form of motivation for both an organization and its employees—and one which suits the times. This type of motivation is focused on the shared desire that employees’ work makes an effective contribution to meaningful purposes, so that it is performance-driven. It embodies the kind of self-management and professional development demanded by younger workers. It does not depend on large outlays of money to generate extra effort, so that it is feasible when funds are tight. Furthermore, intrinsic rewards do not require that a boss be present, as exemplified by the growth of the virtual work and telecommute environments…

Despite these benefits, however, a number of managers underestimate the importance of intrinsic rewards, and continue to treat financial rewards as the key factor in motivating others. While some of this bias may simply come from their use and familiarity with older models, there is another explanation. Research shows that, although people are quick to recognize the role of intrinsic rewards in their own behavior, there is a general tendency to assume that other people are motivated mostly by money and self-interest.8 In our workshops, for example, managers are commonly surprised to learn that intrinsic rewards are valued as much by their employees as by themselves. So, it is important to educate the managers in your organization on this issue.

Building a high-engagement culture

In our work with managers, change agents and training specialists, we have developed seven guidelines for building a culture that supports high levels of engagement and intrinsic rewards:9

1. Begin with a meaningful purpose.

Unlike financial rewards, you simply can’t task the Human Resources Department with developing an “intrinsic reward system.” Building intrinsic motivation is largely a line management responsibility, although HR can offer considerable help. That responsibility begins with spelling out a meaningful purpose for the organization. To be meaningful, this purpose usually needs to involve more than profit, tapping directly into the contribution that the organization’s work makes to its customers—the contribution that allows it to earn a profit. Again, it is largely that sense of contribution to something of value that drives the entire self-management process.

As mentioned earlier, managers tend to recognize the role of intrinsic rewards in their own motivation, but often underestimate their importance for other people. To build a culture of engagement it is important to incorporate training on intrinsic motivation and employee engagement into management development programs. We also find that managers are more credible and effective in promoting the value of engagement when they first learn how to better understand and manage their own intrinsic rewards. Training typically begins by getting managers in touch with their own intrinsic rewards and then shifts to learning how to support the intrinsic rewards of their direct reports. At executive levels, the four intrinsic rewards also provide a useful framework for executive coaching. For example, the New West Institute builds its coaching on executive transitions around the four rewards, identifying what would be most meaningful for the executives in their new position, what choices they have, the new competencies they need to build, and the ways they will identify progress.10 Training and coaching, then, are an important part of embedding intrinsic motivation and engagement into the organization’s culture.

Leaders from the top down need to convey the same message—that the organization stands for doing work that matters and doing it well. When approaching any work project, leaders can underline the importance of contribution by focusing discussions on the basic questions in the self-management process:

What can we do here that is meaningful?

What creative choices can we think of to accomplish this?

How can we make sure we’re doing this work competently?

How can we make sure we’re actually accomplishing the purpose?

These questions bring employee contributions to the foreground and highlight the intrinsic rewards.

4. Engage the “middle.”

Pay special attention to building intrinsic motivation for people in the middle ranges—the large group that is only somewhat engaged. If you are able to move their intrinsic rewards to the high range, they will combine with the people who already highly engaged to form a large majority of highly engaged, energized people—the critical mass needed to support a culture of high engagement.

5. Measure intrinsic reward levels.

Without some way of assessing the state of intrinsic rewards in your organization, you will be flying blind. We use the Work Engagement Profile for systematic measurement, though with experience it is possible to get a rough sense of reward levels from everyday conversations with employees.11 Measuring the reward levels will show you the overall level of engagement in your organization and allow you to recognize improvement. It will also allow you to determine if any rewards are at lower levels than others. Because self-management requires all four reward levels, the lowest rewards will tend to act as a drag on overall engagement over time—so that they deserve special attention.

6. Provide missing building blocks for intrinsic rewards that you need to bolster.

Each reward has its own unique building blocks. Building a sense of competence involves actions that are different than those used in building a sense of choice, for example. The following is a list of key building blocks.12

Access to customers—interactions with those who use what we’ve produced

Measurement of improvement—a way to see if performance gets better

Notice that some of these building blocks involve relatively observable or “hard” elements, such as job designs, information systems, and formal authority. Others involve “softer” aspects of organizational culture and managerial style, such as a non-cynical climate, celebrations, trust, and skill recognition.

7. Adopt a change and implementation process that is itself engaging.

You could try to build intrinsic rewards using a centralized, top-down decision process. But we find that it makes more sense to use the change process itself as a means of fostering high levels of engagement. That was the genius of the Work Out process used by Jack Welch to help change the culture at GE.13 Similar processes are now used for planning and change in a number of organizations.14 In these applications, participatory processes allow teams of employees to identify meaningful work-related problems, recommend solutions that make sense, apply their diverse competencies, and experience a rapid sense of progress. When these processes address the building of intrinsic rewards and engagement, they not only yield workable solutions but also produce their own sense of excitement— which often serves as a significant turning point in the organization’s culture.15

These data are from James O’Toole and Edward Lawler, III, The New American Workplace, Palgrave Macmillan, 2006.

This article is based on research findings and experience collected with the following colleagues: Walter Tymon, Jr., Villanova University; Erik Jansen, Naval Postgraduate School; Bruce Vincent and Steve deBree, New West Institute; and Betty Velthouse, University of Michigan, Flint.

The self-management process is described in more detail in Kenneth Thomas, Intrinsic Motivation at Work, Berrett-Koehler, 2009.

The Work Engagement Profile, with interpretive materials, is available in print form through CPP, Inc., at www.cpp.com/WEP. An online version will be available in 2010. Information on the reliability and validity of the Profile is provided in the Work Engagement Profile Technical Brief, available online at www.cpp.com/WEPtechbrief.

These findings are summarized in the Work Engagement Profile Technical Brief.

These finding are also summarized in the Work Engagement Profile Technical Brief. I am particularly indebted to Professor Jacques Forest of the Universite du Quebec a Montreal for permission to summarize his work. See also the findings on professional development in the article by Walter Tymon, Jr., Stephen Stumpf and Jonathan Doh, “Exploring talent management in India: The neglected role of intrinsic rewards,” Journal of World Business, 2010 in press.

I am particularly indebted to Bruce Vincent and Steve deBree of the New West Institute, an early adopter of the Work Engagement Profile and my book, Intrinsic Motivation at Work (Berrett-Koehler, 2000 and 2009). They have contributed a number of lessons learned from their applications to organizational change and executive transition coaching.

For more specific advice on recognizing and increasing intrinsic reward levels, see Intrinsic Motivation at Work, 2009.

This list is adapted from the Work Engagement Profile. A more detailed discussion of the building blocks and related management actions is contained in Intrinsic Motivation at Work.

The Work-Out process has been described in a number of books, including Jack: Straight From the Gut, by Jack Welch with John Byrne, Warner Business Books, 2001.

See for example the participative planning process described by Marvin Weisbord and Sandra Janoff in Future Search, Second Edition, Berrett-Koehler, 2000.

This observation is based on the change work of the New West Institute, which is built around the concepts in this article. Information on the New West Institute’s participative approach to change is available at www.newwestinstitute.com.